Zambia was hobbling the country’s mining industry by withholding more than $500 million (R5.3 billion) in tax repayments from companies including Glencore Xstrata and Vedanta Resources, the Chamber of Mines said on Friday.
The Zambia Revenue Authority (ZRA) last year stopped tax repayments to mines that do not comply with a rule requiring them to provide an import receipt from the country of final destination of their commodities.
Mines often did not have access to such documents as they sold their products to traders and did not know where the copper ended up, said Emmanuel Mutati, the president of the Chamber of Mines.
“They’re still withholding the repayments,” Mutati said. “It’s crippling the industry now.”
Mumbuna Kufekisa, a spokesman for ZRA in Lusaka, declined to comment.
Zambia, Africa’s biggest copper producer after the Democratic Republic of Congo, relies on the metal for about 70 percent of the country’s export earnings.
The government has accused mining companies of tax avoidance and introduced new rules to tighten monitoring of mines.
The Chamber of Mines had made no progress when it discussed the repayments with officials from ZRA on April 14, Mutati said.
The authority maintained that export certificates were not sufficient for mining companies to claim value-added tax (VAT) repayments, he said.
The withholding of VAT repayments threatened to “wipe out profits” as exporters were forced to finance extra capital requirements, it said this month.
Mining companies in Zambia were also threatened by the 29 percent increase in power costs introduced on April 2, Mutati said. – Matthew Hill for Bloomberg